Assessment Error Costs Milwaukee $750,000

Wisconsin Telephone Company Building. Photo from Loopnet property listing.

AT&T’s sale of its 20-story downtown building got someone inside City Hall a little too excited. The result will cost the City of Milwaukee $750,000.

The structure, 722-740 N. Broadway, drew headlines and discussions of its redevelopment potential when it was sold in June 2021 for $30.1 million. Those that noticed included at least one employee of the Assessor’s Office, which under state law doesn’t assess or tax telecommunications properties.

“We had an assessor [that] on their own looked at an ad in the paper and saw the property had sold and just automatically said ‘oh’ and put it back on the tax rolls,” said Alderman Michael Murphy, summarizing a private briefing on the matter, to members of the Finance & Personnel Committee on May 24. “There is no check and balance where it went up the chain of command to the head of the Assessor’s Office to say ‘hey, you’re putting a $30 million building on the tax roll property, are you sure that maybe this is the right thing to do?’ Zip. Nah. Nada.”

New property owner Reign Capital was sent a tax bill in 2022 for $732,558.19, but didn’t pay it. State statute 76.80 exempts telecommunications properties from local property taxes in favor of a state tax.

Now, the Common Council is being asked to transfer $750,000 from its contingency fund to balance the lost revenue.

“Obviously, this is a pretty big screwup,” said Murphy. “This is a huge amount of money coming out of the contingency fund at an early stage in the process.”

The city budgets for issues with the assessment and property tax process, but those payments are often smaller and take the form of paying out settlements for assessment challenges. The 2023 budget included $1.41 million for what is known as the Remission of Taxes Fund. Assessment Commissioner Nicole Larsen told the committee that more than $900,000 remains, but that the city expects to need the funding to settle claims and other assessment challenges. She called the AT&T issue an inadvertent mistake.

The telecommunications error was made in 2021, before Larsen and Chief Assessor Bill Bowers were with the Assessor’s Office. The office was then led by Steve Miner and Peter Bronek.

“This is a very large mistake,” said Murphy.

Larsen said changes are being made to avoid problems going forward. She noted that there were only 31 telecommunications (or teleco) properties in the city, but that processes were implemented that impact all properties.

“Despite the fact that we have only 31 teleco properties, we have five new policies in place,” said Larsen. “We have revised our workflow for DOR assessed properties. Before we only looked at manufacturing properties that are assessed by the DOR, now we are also looking at the teleco properties.” She said that includes cross-checking properties between the state and local exemption lists and creating a new classification for teleco properties in city records. The office has also created a manager-sign-off process for when a property switches from exempt to taxable and a trigger to review changes when a property’s assessments grows by 20% or more. “If those two last policies were in place at this time, it would have been caught.”

What about the employee that made the mistake? “I assume you’ve had a conversation there. I just want to make sure that’s addressed,” said committee chair Alderman Scott Spiker.

“He’s a very good employee. This is a very unusual mistake,” said Larsen, not revealing the man’s name.

The committee unanimously endorsed the settlement. The council is scheduled to vote on the fund transfer Wednesday.

About The AT&T Building

Many AT&T properties are unlikely to draw headlines, or $750,000 mistakes, but the downtown building is a clear exception.

It serves a dual purpose as an office building and network hub. Effectively every building in the Milwaukee area with a phone line is connected to it.

The structure, the first phase of which was built in 1918, was designed by famed Milwaukee architect Alexander C. Eschweiler for the Wisconsin Telephone Company. A series of additions added several floors to the U-shaped building. A sky bridge, visible from the east, is now used as a conference room.

A six-story addition to the north was constructed in the 1950s. That structure was included in the sale.

A 2017 listing says the building has 219,135 square feet of leasable space and 251,417 square feet of gross space. But city assessment records say the property has 360,000 square feet of finished space. Neither Reign nor AT&T have revealed plans for the building, but real estate sources have speculated there is underutilized space in the building that could be repurposed as housing. New York-based Reign purchased another AT&T property in North Carolina the same month it made the Milwaukee purchase. The firm’s website boasts of having completed more than $2.5 billion worth of redevelopment projects and lease-up efforts since 2010.

Other Assessment Settlements

A handful of assessment settlements have made their way through the Common Council this year.

In March, the council approved a $26,151.82 settlement with an affiliate of the Milwaukee Bucks that resolved a claim of excessive taxation for the former Bradley Center property, 1001 N. Vel R. Phillips Ave. In February, the council approved a $94,863.83 settlement with WWB Development II, an affiliate of Irgens, related to a legal claim of excessive taxation for the former M&I Bank tower, 778 N. Water St. (770 North). That same month, it also approved a $279,965.50 settlement with Irgens-affiliated Broadway Tierra Partners stemming from a dispute over the assessed value of the 25-story BMO Tower building to the north of the M&I building.

Pending before the council is a $32,077.26 settlement with the New Land Enterprises affiliate that owns the Rhythm apartment building, 1640 N. Water St., covering two years. Another settlement would resolve a judgment against the city for taxing a student housing building, 365 N. Honey Creek Pkwy., on the Wisconsin Lutheran High School campus. The city would refund approximately $100,000 in 2022 property taxes and not assess the building going forward. Both are scheduled to be approved Wednesday.

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Related Legislation: File 230096